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‘Semi-Socialism’ in Microcosm: Yiwu and the Free Market

Last year marked the 38th year of China’s economic reforms. Over the past nearly four decades, Yiwu, a city in the eastern province of Zhejiang, has become the world’s largest small-commodities market, offering an expansive range of manufactured goods — from pens to socks to Christmas decorations — at wholesale prices. Thanks to the city’s explosive growth, it has become a reliable barometer for the country’s wider reform trends.

I have known about Yiwu for a long time now, but my earliest memory of the city was tied to its poverty.

When I was about 5, I traveled to Yongkang, a city in Zhejiang of some half a million people, with my mother to visit some relatives for the first time. I remember the trip on the rickety green train. We alighted at Yiwu Station, from which we set out for Yongkang. My only memory of the train station was the sugarcane husks that covered the ground. I asked my mother, “What is this place?” She told me. I asked if it was fun in Yiwu, and she replied that the city was even poorer than Huzhou, a few hundred kilometers to the north on the banks of Lake Tai — the home we had left.

In 1991, the State Administration for Industry and Commerce published a list of China’s “top-10 specialized markets.” Yiwu ranked first. As the village developed, international organizations like the United Nations and the World Bank also came to recognize it as the largest small-commodities wholesale market in the world. Once heartbreakingly impoverished, Yiwu changed in an instant to become a land of soaring profits, much like its neighbor to the south, Wenzhou.

How did this turnaround happen in such a seemingly hopeless place? How did Yiwu start with nothing and then undergo this inexplicable rise to prominence? For the answers to these question, we must look to the people who shaped its fortunes.

Feng Zhilai was a veterinarian who primarily treated cows and pigs, and he had a reputation in Yiwu for treating his clients fairly. But perhaps Feng’s greatest contribution to the city — and to China — was his treatise on “semi-socialism,” which he was bold enough to send to policymakers in Beijing.

After graduating with a veterinary science degree in 1955, Feng, then 20, was assigned to work in the agriculture and forestry department of Rui’an County. Five years later, because of his unpopular political beliefs, Feng was sent to Huling District, a remote operations base, to serve as the vet for the agricultural technology station there.

The misfortunes that befell Feng during his time in the countryside opened his eyes to the true state of China. Bearing witness to the years of famine during the Great Leap Forward deeply affected him. Was this really socialism? How could China build a socialist society with such backward views? Was there even a way out for the country after such a catastrophe? These were the questions Feng asked himself then.

If we can refer to the economy of ancient China as ‘semi-capitalist,’ then we can also say that our current economy is a ‘semi-socialist’ one.

- Feng Zhilai, veterinarian

Feng vacillated between Marxist theory and the weight of reality. “Economically, we are still a backwards country,” he wrote. “If we can refer to the economy of ancient China as ‘semi-capitalist’ — even though it had both capitalist and semi-feudal qualities — then we can also say that our current economy is a ‘semi-socialist’ one.”

Based on his observation of the relatively higher production levels of semi-socialist economies, Feng boldly wrote: “In light of China’s current levels of productivity, I believe that setting a fixed output quota for each farming household is the only path forward because it will mobilize the ‘work consciousness’ of the farmers. This is the call of 600 million people!”

Two months later, Feng wrote a second piece that was even more emphatic than the first. He titled it “What Now?” and sent three copies to Beijing.

Perhaps not surprisingly, the provincial Party committee had little patience for Feng’s radical ideas: In 1963, an armed escort brought him home to Qiaotong Village in Yiwu County, where he was assigned supervised labor.

In October 1987, the National People’s Congress (NPC) convened to discuss “socialism with Chinese characteristics.” The result was the first report to systematically expound on the initial-stage theory of socialism. But Feng’s similar treatise on semi-socialism had already preceded the NPC’s document by a full 25 years, and his adamant belief in the need for fixed output quotas came 16 years before Xiaogang Village, in the eastern province of Anhui, became the “birthplace of rural reform” as the first area to implement such a policy.

A group of farmers listen to an Yiwu entrepreneur giving business advice in Longyou, Zhejiang province, Feb. 8, 2001. Fu Yongjun/VCG

Prominent Figures of Yiwu: Xie GaohuaCounty Party secretary, memorialized with a bronze statue

Although not a Yiwu local, Xie Gaohua once held the city’s highest office as county Party secretary. His involvement with Yiwu began because of a heated discussion with a street vendor named Feng Aiqian (no relation to Feng Zhilai).

Poor living conditions forced Feng into business at an early age, contributing whatever she could to support her family. She recalls the time she took a basket and went around asking her neighbors for a kilogram of rice she could prepare for dinner. She ended up visiting seven homes before she got what she needed.

Though a few rungs above begging, working as a hawker was and remains a difficult job. Because they often lack the proper permits and operate in a gray legal area, vendors are frequently harassed by chengguan, or city management officials, and many believe the vicious cycle of being caught and fined is not a sustainable way of life. After one particular encounter with authorities, Feng, feeling she was out of options, laid the last of her hopes on a public figure coming forward to vouch for her and speak on her behalf.

If you’re going to be an official, you have to understand your people. The lives of the commoners here are full of hardships.

- Feng Aiqian, hawker

One evening in May 1982, Feng saw a tall figure walking near the county government compound. She approached the man and asked, “Are you the new Party secretary, Xie Gaohua?” As a woman who had only ever known poverty, Feng never dreamed that she would be invited to step foot into a county magistrate’s office.

“We have to do a little business to feed our families, so why is the government chasing us out?” an exasperated Feng asked Xie. “If you’re going to be an official, you have to understand your people. The lives of the commoners here are full of hardships; at least you could let us make a living!”

Perhaps Feng was nervous, or perhaps she had held back her resentment and anger for too long. Either way, her rapid-fire questions left tears streaming down her face.

The meeting lasted over an hour. In the end, Xie made two promises: First, he reassured Feng that the government understood her situation and would allow her to continue working as a street vendor. Second, he said he would talk to the departments involved and get them to leave her alone.

His encounter with one of the humblest members of society left Xie deeply moved. On Aug. 25, 1982, the county government, largely thanks to Xie’s influence, announced that it would officially open a small-commodities market, beginning in September. This was the first time in China that an official document had recognized the legality of what was essentially a free market for farmers and vendors.

Legitimizing the commodities market violated at least three existing regulations: first, that farmers were not allowed to abandon farming to go into business; second, that market trade could not include the sale of manufactured goods; and third, that private individuals could not peddle wholesale items. On a broader scale, the concession from the government was an outright, if belated, acknowledgement of the fact that trading in small commodities already existed in Yiwu — and everywhere else, for that matter. “At the time, taking this new official position was a huge risk,” Xie said.

Feng and countless others like her were lifted out of poverty because of the success of the market, for which they felt indebted to Secretary Xie. Financial writer Wu Xiaobo wrote that in 1992, on the 10th anniversary of the establishment of the Yiwu small-commodities market, the city’s farmers and vendors raised enough money for a bronze statue to memorialize the man they affectionately call “our secretary Xie.”

It was in Yiwu that China’s opening-up policies harkened back to their origins. At its core, the reforms were never part of a larger, loftier ideological movement. Instead, the vision was a grand journey of the huddled masses rising as a single body from poverty into prosperity.

With condoms, the people who need them will always find a way to get them. So in that case, why are we obstructing the natural state of things?

- Xie Gaohua, county Party secretary

Xie once recalled a trip back to his hometown of Quzhou, in Zhejiang’s west, during the lunar new year holiday in 1982. Along the way, he encountered a trader from Yiwu and invited the man to his home for tea. When the trader heard that Xie also worked in Yiwu, he became more guarded, as inquiries into “capitalist activity” had left him too afraid to speak freely. Xie told the trader that he worked for the local government, without specifying that he was actually the county Party secretary. Then he looked through the vendor’s goods, which were mainly trifling objects. He even found condoms, which were strictly regulated during the planned-economy era.

“How is the small-commodities market still thriving after all these years?” Xie asked the man. “For example, with condoms, the people who need them will always find a way to get them. So in that case, why are we obstructing the natural state of things and clashing with commoners?”

The hawker Feng’s version of the market emerged like weeds that grew stubbornly from uncultivated earth. But ultimately, the vendors’ actions were driven only by the desire to avoid starvation.

Fortunately, Yiwu officials led by way of their tacit acceptance and tolerance. The prerequisite for this was that they had recognized at an early stage the hardships of the people’s lives and the government’s limited resources for lending support. Consequently, letting the residents use their own individual abilities to lift their families out of poverty was a practical, realistic decision. It was also the basic standard of political conscience that the ruling party should observe.

In many situations, though, rulers should have more than a conscience. They should also be courageous and resourceful, resolute and daring, and — perhaps above all — highly passionate.

Xie Gaohua was the son of farmers and had only an elementary school education. He admitted that he would likely never understand Marx’s “Capital: Critique of Political Economy” or other major theories. “But I understand the common sense behind our human experience, and I know the fate of being an official,” he said.

A Chinese version of this article first appeared in Sixth Tone’s sister publication, The Paper.

(Header image: A shop owner and her daughter look at a mobile phone while waiting for customers at their wholesale Christmas decorations shop in Yiwu International Trade City, Zhejiang province, Sept. 19, 2015. Kevin Frayer/Getty Images/VCG)